Agenda item

The Assistant Director (Housing Property & Development) presented a report to the Cabinet Committee. He advised that following a tender exercise for Phase 2 of the Council’s house-building programme at Burton Road, Loughton six contractors had been invited to tender to construct 51 new affordable homes, based on a Design and Build contract. Out of the six contractors five tenders had been received and were registered as below:

1.         United Living (South) Limited                         £9,499,651

2.         Mulalley & Co Limited                                     £9,740,241

3.         Durkan Limited                                               £10,264,909

4.         Galliford Try Partnership Limited                    £11,201,432

5.         Higgins Construction Plc                                £11,927,356

6.         Hill Partnership Limited                                   Did not Tender

It had been made clear in the tender documents that the Council would not be obliged to accept the lowest tender.

Checks had been carried out by Pellings LLP on all of the tenders received, and in view of the significant price difference between the second lowest and the three other tenders, only the two lowest tenders had been analysed in detail.

The tenders submitted by United Living (South) Ltd and Mulalley & Co Ltd, as lowest and second lowest respectively, included a number of qualifications and pricing omissions, which had been discussed during post-tender interviews co-ordinated by Pellings LLP. Neither United Living Ltd nor Mullalley & Co Ltd had been prepared to lift these omissions and qualifications without a pricing review; therefore each had been asked to review these and submit a revised unqualified tender sum. These were as follows:

This had resulted in the difference between the lowest and second lowest now being just £82,528 (0.84%).

United Living Ltd had provided costs as requested, albeit by including provisional sums. However they had qualified this further and included in their tender clarifications that they “have only been able to price based on the information provided with the tender. This information was in some cases not yet complete and required further development before we are able to provide a complete / competitive price.” This represented a financial significant risk, as the prices submitted could increase to a point where they exceeded that of the second lowest tender.

Mullalley & Co Ltd on the other hand had complied with the request to provide an unqualified tender, again through the use of provisional sums, with the exception of pricing for the treatment or removal of any contaminated ground found on the site. Based on soil surveys undertaken prior to tender where no contamination had been found, this represented a low risk according to Pellings LLP.

The pre-tender estimate was £8,125,000, which was based on Quarter 2 2015 rates without any inflationary uplift. The lowest tender as originally received was around 16% above the estimated cost and it was the view of  Pellings LLP that this was due to a number of inflationary pressures affecting the construction sector.

The contract had been tendered based on a 20 month contract period (87 weeks). United Living had based their price on this contract period. However, Mullalley & Co Ltd had based their tender on a longer contract period of 24 months (105 weeks), with a completion date in March 2018, but had indicated that it may be possible to complete the works sooner. A longer contract period allowed Mullalley & Co Ltd more time to put in place the resources needed to complete the works and reduced their risk of incurring any liquidated and ascertained damages should the contract period not be met. This did however mean a loss would result to the Council of around £130,000 in rent for this extended period.

Decision:

That Mullalley & Co Ltd be awarded the contract for the construction of 51 new affordable homes at Burton Road, Loughton, which forms Phase 2 of the Council’s House-building Programme, for the adjusted Tender Sum of £9,847,179.00, being the second lowest tender received.

Reasons for Decision:

The Council House-building Cabinet Committee has agreed to tender the works using the East Thames Framework Agreement, based on a Design and Build Contract. Therefore, this tender exercise satisfies that decision and has been undertaken in line with the Council’s Development Strategy and the Council’s Contract Standing Orders.

Other Options Considered and Rejected:

(1)        To appoint United Living Ltd, being the lowest tender received in the adjusted sum of £9,764,651.00. However, there is a risk that this tender sum will increase to the point it will exceed the second lowest tender once all of the qualifications included by United Living Ltd are costed during the contract period.

(2)        To appoint any of the other Contractors that submitted a tender

(3)        Not to undertake the works. However, this would not deliver any new affordable homes for applicants on the Council’s waiting list but would also jeopardise the Council’s 1-4-1 receipts and £500,000 of HCA grant.